Is the Golden Goose of Business Rates Being Over Cooked?

Not only have crippling business rates bills helped add to the demise of both Toys R Us and Maplin, which have just announced to be on the brink of collapse, but- according to Colliers International, the commercial real estate agency and consultancy- the Government will be nearly £165 million down over the next five years if the companies go down now and don’t pay their business rates bills.
 
Both struggling retailers appear to have failed to secure rescue buyers- putting 5,500 jobs at risk. Maplin has over 200 stores and 2,500 staff in the UK, while Toys R Us employs 3,000 workers in its 105 stores.
 
Earlier this year, Colliers calculated that Toys R Us could have saved over £17* million had the 2017 business rates revaluation gone ahead as planned in 2015. However due to postponement and the effect of the Government’s transitional rate scheme, the company was saddled with big bills -  a rates bill of nearly £22 million alone in 2017/8 and a similar figure of £22m for 2018/9- a bill just about to be served. Colliers estimate that Maplin would also just be receiving its 2018/19 rates bill- a total figure of around £10.25 million for the year. 
 
The first payment instalment of the bills would be on April 1st 2018, since retailers can elect to pay their bills monthly over the 12-month period. Obviously, companies only pay their business rates when they are trading, so a fall into administration will cost the Exchequer over £32 million this year from these two companies alone, and nearly 165 million, (£112 m from Toys R Us and £52.6m from Maplin) over the next five years should they have maintained trading.
 
“Toys R Us and Maplin are like so many other physical retailers facing financial pain at the moment, with poor sales, reduced consumer footfall and competition from the internet retailers.” said John Webber Head of Business Rates at Colliers International. “And the current rating system is a further drain.  Government policy has not helped. The policy of phasing in rate reductions, whereby it takes five years of "transition" until businesses in England are allowed to pay their business rate bills at the new revalued levels, has meant many companies such as Toys R Us and Maplin were still been paying much more than expected on many of their stores across the UK.  Then moving rate increases from RPI to CPI indexing purely tinkered with the issue and still meant a 3% rise on business rates this year (around a £200 million increase). Many retail stores just can’t take this right now. “
 
Webber added, “I do wonder how many companies need to go down before the Government takes some proper action and considers proper business rates reform. Burying their heads in the sand not only impacts on retailers and the high street, but also ultimately on the man in the street. If companies go into administration, they can’t pay their taxes. The Government needs to make sure it doesn’t overcook the golden goose of business rates or there won’t be any golden eggs left for the Treasury to take home.”

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John Webber

Head of Rating

Birmingham

I have over 30 years’ experience in the rating industry and lead a 90 plus rating team at Colliers International.  When I took over responsibility for the team in 2005, it consisted of only a dozen people and has now grown into one of the leading rating advisory teams in the country.  I am a member of Colliers International Management Executive as well as sitting on the company’s promotion panel. 

I am regularly called upon by the national media to give my views on a range of business rates issues and I am vocal commentator on the 2017 Revaluation.

I started my career in the Valuation Office Agency in Kidderminster.  I joined Gerald Eve in 2000 where I spent 10 years before moving to Gooch Webster (now Colliers International). I sit on the National Retail Panel of Rating Surveyors Association which provides guidance on how the RSA town committees work with the VOA and valuation matters.  John sits on the RICS Rating Diploma Committee having passed the prestigious qualification in 2014.

Philip Harrison and I founded 'Accurates' in 2007, the Collier's Compliance and Audit team, which although forms an integral part of the Rating Team is now a leading brand in its own right.

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